tesco fresh and easy failure case study

Watch CBS News

Why did Tesco fail in the U.S.?

By Margaret Heffernan

September 12, 2013 / 6:45 AM EDT / MoneyWatch

(MoneyWatch) Tesco's American experiment, Fresh & Easy, has failed and the company has been lucky to hand over more than 150 of its stores to billionaire Ron Burkle's Yucaipa Cos. The deal isn't as sweet as it sounds : Tesco ( TSCDF ) has to lend Burkle tens of millions of dollars to take the business off its hands, and additional costs include laying off several hundred permanent staff and shutting dozens of stores. So this is a big and costly failure. But Tesco has a terrific track record in other markets -- notably eastern Europe and China. So why did it come unstuck in the U.S. -- and why do British businesses predictably fail when taking on the American market?

Tesco's timing was unfortunate; the new venture launched in 2007, just as consumer spending and taste for adventure went into sharp decline. The focus on ready meals required higher levels of spending than raw produce and it meant consumers had to be prepared to try something not radical but new: Taking home a supermarket meal in lieu of ordering a take out or cooking from scratch. This is a well established habit in Europe but less mainstream in the U.S.

You can't blame the research. Tesco lavished time and resources understanding how Americans live, shop and eat. And Burkle would hardly be willing to take the stores if he felt they were doomed. The ready meal focus has worked well for Whole Foods but what's less obvious is how far down the market it retains its appeal. It ought to work -- weekday shoppers lack time to shop and ready meals are cheaper than take out. So why didn't it?

In the recession, many people had time, just no money. That reduces the market for ready meals. But more crucially, this kind of food requires a change of habit. It means you have to think differently about how you shop and what you shop for. Any marketer knows that changing habits is hard and expensive because the crucial factor is time. Time to get the message out. Time for it to sink in. Time for new habits to replace old ones.

The ghost at Tesco's feast was Marks & Spencer, the British retailer which bought Brooks Brothers, watched it decline but hung in for 13 years, finally selling the clothier at less than a third of the price it paid for it. What that disaster taught Tesco was impatience: Don't wait for the market to change -- get out now.

I'm not at all persuaded that Tesco has made the smart decision, just the easy one. Significant market growth always takes time and the best businesses don't lose their nerve easily. The real reason Tesco may be pulling out isn't because they did anything wrong in the U.S. but because their home market is proving very challenging. Assailed by competitors, they've visibly lost the plot, with poorly stocked stores, lavish but meaningless advertising and an absence of new ideas so obvious it hurts. Killing off a young venture is always easier than fixing the old one. But is it smart?

Margaret Heffernan has been CEO of five businesses in the United States and United Kingdom. A speaker and writer, her most recent book Willful Blindness was shortlisted for the Financial Times Best Business Book 2011. Visit her on www.MHeffernan.com .

More from CBS News

Free Tesco's Fresh & Easy: Learning from U.S. Exit Case Study Solution | Assignment Help

Harvard Case - Tesco's Fresh & Easy: Learning from U.S. Exit

"Tesco's Fresh & Easy: Learning from U.S. Exit" Harvard business case study is written by Christopher Williams, Chandra Sekhar Ramasastry. It deals with the challenges in the field of General Management. The case study is 14 page(s) long and it was first published on : Nov 26, 2013

At Fern Fort University, we recommend that Tesco carefully analyze the factors that led to the failure of Fresh & Easy in the U.S. market and implement a strategic approach to international expansion that addresses these shortcomings. This approach should prioritize a deep understanding of the local market, a robust product and service offering, and a sustainable business model that considers both financial viability and long-term success.

2. Background

Tesco, a leading British supermarket chain, launched Fresh & Easy in the United States in 2007 with the ambitious goal of replicating its success in the UK market. The concept centered around offering a limited selection of fresh, convenient, and affordable grocery items in smaller, neighborhood-focused stores. However, despite initial optimism, the venture ultimately failed, leading to Tesco's withdrawal from the U.S. market in 2013.

The case study focuses on the key challenges that Tesco faced in the U.S. market, including:

• Lack of understanding of the American consumer: Tesco underestimated the importance of brand familiarity and loyalty in the U.S. market, where established players like Walmart and Kroger held strong positions.
• Limited product offering: The focus on fresh and convenience failed to resonate with American shoppers who valued a broader product selection and competitive pricing.
• Operational inefficiencies: Tesco struggled to adapt its supply chain and logistics infrastructure to the U.S. market, leading to stockouts and inconsistent product quality.
• Aggressive competition: Tesco faced intense competition from established players with deep pockets and extensive distribution networks.
• Financial losses: The combination of these factors resulted in significant financial losses, ultimately forcing Tesco to exit the U.S. market.

3. Analysis of the Case Study

Strategic Framework:

To analyze the case study, we will utilize a combination of frameworks:

• Porter's Five Forces: This framework helps assess the competitive landscape and identify key industry forces influencing Tesco's success.
• SWOT Analysis: This framework helps identify Tesco's internal strengths and weaknesses, as well as external opportunities and threats.
• Balanced Scorecard: This framework provides a comprehensive view of Tesco's performance across key areas, including financial, customer, internal processes, and learning and growth.

Porter's Five Forces:

• Threat of New Entrants: High, due to the relatively low barriers to entry in the grocery retail industry.
• Bargaining Power of Buyers: High, as consumers have numerous options for grocery shopping.
• Bargaining Power of Suppliers: Moderate, as Tesco had some leverage in negotiating with suppliers but faced competition from other large retailers.
• Threat of Substitute Products: High, as consumers can choose from a variety of alternative food options, including restaurants and online delivery services.
• Competitive Rivalry: Very high, due to the presence of established players like Walmart, Kroger, and Target, as well as the emergence of new competitors like Amazon.

SWOT Analysis:

• Strengths: Strong brand recognition in the UK market, extensive supply chain network, experience in grocery retailing.
• Weaknesses: Lack of brand recognition in the U.S. market, limited product offering, operational inefficiencies, insufficient understanding of the American consumer.
• Opportunities: Growing demand for fresh and convenient food options, increasing online grocery shopping, potential for partnerships with local suppliers.
• Threats: Intense competition from established players, economic uncertainty, changing consumer preferences.

Balanced Scorecard:

• Financial: Tesco's financial performance in the U.S. market was weak, with significant losses due to low sales and high operating costs.
• Customer: Tesco failed to attract a significant customer base in the U.S., as its product offering and store experience did not resonate with American consumers.
• Internal Processes: Tesco's supply chain and logistics operations were not optimized for the U.S. market, leading to inefficiencies and stockouts.
• Learning and Growth: Tesco's lack of understanding of the American consumer and its failure to adapt to the local market environment hindered its ability to learn and grow in the U.S.

4. Recommendations

Thorough Market Research: Before entering any new market, Tesco should conduct extensive market research to understand the local consumer preferences, competitive landscape, and regulatory environment. This research should include:

• Consumer segmentation: Identify target customer segments and understand their shopping habits, preferences, and price sensitivity.
• Competitive analysis: Analyze the strengths and weaknesses of existing competitors and identify potential opportunities for differentiation.
• Market trends: Identify emerging trends in the grocery retail industry, including online shopping, convenience, and health and wellness.

Tailored Product and Service Offering: Tesco should tailor its product and service offering to meet the specific needs and preferences of the local market. This includes:

• Product selection: Offer a wider range of products to cater to diverse consumer needs, including both fresh and packaged goods.
• Pricing strategy: Develop a competitive pricing strategy that balances profitability with customer value.
• Store format and experience: Design stores that are appealing and convenient for local customers, with adequate parking, easy navigation, and a pleasant shopping experience.

Operational Efficiency and Scalability: Tesco should ensure its operations are efficient and scalable to support growth in the new market. This includes:

• Supply chain optimization: Develop a robust supply chain network that can deliver fresh products consistently and efficiently.
• Logistics infrastructure: Invest in logistics infrastructure, including distribution centers and transportation networks, to support rapid and reliable delivery.
• Technology adoption: Leverage technology to improve operational efficiency, enhance customer experience, and gain insights into market trends.

Strong Brand Building and Marketing: Tesco should invest in building a strong brand presence in the new market through effective marketing and communication strategies. This includes:

• Brand positioning: Develop a clear and compelling brand positioning that differentiates Tesco from competitors and resonates with target customers.
• Marketing campaigns: Launch targeted marketing campaigns to raise awareness, build brand affinity, and drive customer acquisition.
• Customer relationship management: Implement customer relationship management (CRM) systems to track customer interactions, personalize communications, and build loyalty.

Strategic Partnerships and Acquisitions: Tesco should consider strategic partnerships and acquisitions to accelerate market entry and gain access to local expertise and resources. This includes:

• Joint ventures: Partner with local companies to leverage their knowledge of the market and customer base.
• Acquisitions: Acquire existing businesses in the target market to gain a foothold and accelerate growth.

5. Basis of Recommendations

These recommendations are based on the following considerations:

• Core competencies and consistency with mission: Tesco's core competency lies in its expertise in grocery retailing, which can be leveraged to succeed in new markets. The recommendations align with Tesco's mission of providing high-quality products and services to customers at competitive prices.
• External customers and internal clients: The recommendations focus on understanding and meeting the needs of external customers while also empowering internal clients to deliver exceptional service.
• Competitors: The recommendations address the competitive landscape by emphasizing differentiation, operational efficiency, and strategic partnerships.
• Attractiveness: The recommendations are designed to enhance Tesco's attractiveness to investors and customers by improving financial performance, customer satisfaction, and brand value.

6. Conclusion

Tesco's failure in the U.S. market highlights the importance of a thorough understanding of the local market, a tailored product and service offering, and a sustainable business model. By implementing the recommendations outlined above, Tesco can increase its chances of success in future international expansion efforts.

7. Discussion

Alternatives:

• Focus on a niche market: Tesco could focus on a specific niche market, such as organic food or ethnic groceries, to reduce competition and build a loyal customer base.
• Adopt a low-cost strategy: Tesco could adopt a low-cost strategy similar to Walmart, focusing on offering competitive prices and a basic product selection.

Risks and Key Assumptions:

• Risk: The recommendations assume that Tesco can overcome its past mistakes and learn from its experience in the U.S. market.
• Risk: The recommendations assume that Tesco can successfully adapt its operations and product offering to the specific needs of the target market.
• Assumption: The recommendations assume that the global grocery retail market will continue to grow and offer opportunities for expansion.

8. Next Steps

• Conduct market research: Conduct in-depth market research to identify potential target markets and develop a detailed understanding of the local consumer preferences, competitive landscape, and regulatory environment.
• Develop a strategic plan: Develop a comprehensive strategic plan outlining Tesco's objectives, target markets, product and service offering, operational strategy, and marketing plan.
• Pilot launch: Launch a pilot program in a selected target market to test the feasibility of the proposed strategy and identify any necessary adjustments.
• Scale up operations: Based on the success of the pilot program, scale up operations in the target market by opening additional stores, expanding product selection, and increasing marketing efforts.

By following these steps, Tesco can increase its chances of success in future international expansion efforts, leveraging its core competencies and adapting to the specific needs of each market.

Hire an expert to write custom solution for HBR General Management case study - Tesco's Fresh & Easy: Learning from U.S. Exit

• Tesco Plc Fresh Easy United States Case Study Solution
• Apples Zoom Lenses Extending Boundaries Multichannel Retailing Tescocom Case Study Solution
• Tesco Plc Strategy India Case Study Solution
• Tesco Ocado Competing Online Models Case Study Solution
• Tetra Pak Challenge Intimacy Key Customer Case Study Solution
• Emart Inc Expansion Us Supermarket Industry Case Study Solution
• Whole Foods Market Inc Case Study Solution
• Uniqlo Expansion Canada Case Study Solution
• Marks Spencer Ltd Case Study Solution
• Subway Problems Place Product Price Case Study Solution
• Whole Foods Amazon Case Study Solution
• Shop Thursdays Post Covid Strategy Case Study Solution

Case Description

In mid-April 2013, the chief executive officer of Tesco PLC, the world's third largest global retailer headquartered in London, United Kingdom, must explain to shareholders his decision to close down the operations of the fully owned subsidiary, Fresh & Easy Neighborhoods Market Inc., in the United States. Following a December 2012 strategic review that reported that the subsidiary was not delivering acceptable returns, operations have already been discontinued and a buyer is being sought. Although the focus on fresh food to ameliorate the health care costs of obesity in the United States was a driver for establishing the subsidiary, the effects of the 2008 recession discouraged consumers from paying the higher costs of fresh food. Is exiting the United States the right decision for Tesco? How should the process of exit be managed? Are there any takeaways from the U.S. operations that Tesco can apply elsewhere in its global strategy?

🎓 Struggling with term papers, essays, or Harvard case studies? Look no further! Fern Fort University offers top-quality, custom-written solutions tailored to your needs. Boost your grades and save time with expertly crafted content. Order now and experience academic excellence! 🌟📚 #MBA #HarvardCaseStudies #CustomEssays #AcademicSuccess #StudySmart Write my custom case study solution for Harvard HBR case - Tesco's Fresh & Easy: Learning from U.S. Exit

Tesco's Fresh & Easy: Learning from U.S. Exit FAQ

What are the qualifications of the writers handling the "tesco's fresh & easy: learning from u.s. exit" case study.

Our writers hold advanced degrees in their respective fields, including MBAs and PhDs from top universities. They have extensive experience in writing and analyzing complex case studies such as " Tesco's Fresh & Easy: Learning from U.S. Exit ", ensuring high-quality, academically rigorous solutions.

How do you ensure confidentiality and security in handling client information?

We prioritize confidentiality by using secure data encryption, access controls, and strict privacy policies. Apart from an email, we don't collect any information from the client. So there is almost zero risk of breach at our end. Our financial transactions are done by Paypal on their website so all your information is very secure.

What is Fern Fort Univeristy 's process for quality control and proofreading in case study solutions?

The Tesco's Fresh & Easy: Learning from U.S. Exit case study solution undergoes a rigorous quality control process, including multiple rounds of proofreading and editing by experts. We ensure that the content is accurate, well-structured, and free from errors before delivery.

Where can I find free case studies solution for Harvard HBR Strategy Case Studies?

At Fern Fort University provides free case studies solutions for a variety of Harvard HBR case studies. The free solutions are written to build "Wikipedia of case studies on internet". Custom solution services are written based on specific requirements. If free solution helps you with your task then feel free to donate a cup of coffee.

I’m looking for Harvard Business Case Studies Solution for Tesco's Fresh & Easy: Learning from U.S. Exit. Where can I get it?

You can find the case study solution of the HBR case study "Tesco's Fresh & Easy: Learning from U.S. Exit" at Fern Fort University.

Can I Buy Case Study Solution for Tesco's Fresh & Easy: Learning from U.S. Exit & Seek Case Study Help at Fern Fort University?

Yes, you can order your custom case study solution for the Harvard business case - "Tesco's Fresh & Easy: Learning from U.S. Exit" at Fern Fort University. You can get a comprehensive solution tailored to your requirements.

Can I hire someone only to analyze my Tesco's Fresh & Easy: Learning from U.S. Exit solution? I have written it, and I want an expert to go through it.

🎓 Struggling with term papers, essays, or Harvard case studies? Look no further! Fern Fort University offers top-quality, custom-written solutions tailored to your needs. Boost your grades and save time with expertly crafted content. Order now and experience academic excellence! 🌟📚 #MBA #HarvardCaseStudies #CustomEssays #AcademicSuccess #StudySmart Pay an expert to write my HBR study solution for the case study - Tesco's Fresh & Easy: Learning from U.S. Exit

Where can I find a case analysis for Harvard Business School or HBR Cases?

Which are some of the all-time best harvard review case studies.

Some of our all time favorite case studies are -

Can I Pay Someone To Solve My Case Study - "Tesco's Fresh & Easy: Learning from U.S. Exit"?

Yes, you can pay experts at Fern Fort University to write a custom case study solution that meets all your professional and academic needs.

Do I have to upload case material for the case study Tesco's Fresh & Easy: Learning from U.S. Exit to buy a custom case study solution?

We recommend to upload your case study because Harvard HBR case studies are updated regularly. So for custom solutions it helps to refer to the same document. The uploading of specific case materials for Tesco's Fresh & Easy: Learning from U.S. Exit ensures that the custom solution is aligned precisely with your needs. This helps our experts to deliver the most accurate, latest, and relevant solution.

What is a Case Research Method? How can it be applied to the Tesco's Fresh & Easy: Learning from U.S. Exit case study?

The Case Research Method involves in-depth analysis of a situation, identifying key issues, and proposing strategic solutions. For "Tesco's Fresh & Easy: Learning from U.S. Exit" case study, this method would be applied by examining the case’s context, challenges, and opportunities to provide a robust solution that aligns with academic rigor.

"I’m Seeking Help with Case Studies,” How can Fern Fort University help me with my case study assignments?

Fern Fort University offers comprehensive case study solutions, including writing, analysis, and consulting services. Whether you need help with strategy formulation, problem-solving, or academic compliance, their experts are equipped to assist with your assignments.

Achieve academic excellence with Fern Fort University! 🌟 We offer custom essays, term papers, and Harvard HBR business case studies solutions crafted by top-tier experts. Experience tailored solutions, uncompromised quality, and timely delivery. Elevate your academic performance with our trusted and confidential services. Visit Fern Fort University today! #AcademicSuccess #CustomEssays #MBA #CaseStudies

How do you handle tight deadlines for case study solutions?

We are adept at managing tight deadlines by allocating sufficient resources and prioritizing urgent projects. Our team works efficiently without compromising quality, ensuring that even last-minute requests are delivered on time

What if I need revisions or edits after receiving the case study solution?

We offer free revisions to ensure complete client satisfaction. If any adjustments are needed, our team will work closely with you to refine the solution until it meets your expectations.

How do you ensure that the case study solution is plagiarism-free?

All our case study solutions are crafted from scratch and thoroughly checked using advanced plagiarism detection software. We guarantee 100% originality in every solution delivered

How do you handle references and citations in the case study solutions?

We follow strict academic standards for references and citations, ensuring that all sources are properly credited according to the required citation style (APA, MLA, Chicago, etc.).

Top Sellers

• PDVSA & CITGO (A): Seeking Stability in an Uncertain World case study solution
• Making a Team on Dream11: A Fantasy Sports Platform case study solution
• Bharti Airtel's "Airtel Zero": Violation of Net Neutrality? case study solution
• Y&D Audio Warranty Policies: Accrual Estimates and Ethical Decision-Making case study solution
• Juchheim: The Failthful Pursuit of Flavour, Culture and Family Values case study solution
• Managing Religion in the Workplace: Abercrombie & Fitch and Masterpiece Cakeshop case study solution
• Advantage Legrand: Building a B2B Brand case study solution
• Canada Border Services Agency: The Reorganization case study solution
• Shanghai Real Estate (A) case study solution
• Lac-Megantic Train Derailment: Putting Out the Fires (A) case study solution
• Microsoft Security Response Center (A) case study solution
• The Trans Mountain Expansion Project: An Indigenous Bid for the Future of Energy Infrastructure case study solution
• The Sequel to Chance Encounters case study solution
• Juggling Shareholders' Expectations: The Molson-Coors Merger case study solution
• Nurturing Green: Vows and Woes of an Entrepreneur (A) case study solution
• Mira's Microbrewery Inc.
• Sonder Holdings Inc: Using Technology to Solve Hospitality's Frictions
• Lyonbiopole: The Challenge of Becoming a World-class Biotechnology Cluster
• Strategic Planning at Apple Inc.
• Sobey's Inc: A Strategic Approach to Sustainable Seafood Supply
• Waste Management's Organic Growth Group
• The Dance of Dharma: On the Difficulty of Being Good
• RHCF: Reaching Primary Healthcare to the Base of the Pyramid
• James McAllister: Learning from BP and NASA
• Inner City Renovation: Rebuilding Properties, Lives and Communities
• Lake Superior Lodge: It's Not Always About
• Mate1.com: Digital Dating Dilemma
• Rick Welts: NBA League and Club Leadership Roles Provide Platform for Broader Societal Change
• E-Mart Inc.: Expansion into the US Supermarket Industry

Referrences & Bibliography for SWOT Analysis | SWOT Matrix | Strategic Management

1. Andrews, K. R. (1980). The concept of corporate strategy. Harvard Business Review, 61(3), 139-148. 2. Ansoff, H. I. (1957). Strategies for diversification. Harvard Business Review, 35(5), 113-124. 3. Brandenburger, A. M., & Nalebuff, B. J. (1995). The right game: Use game theory to shape strategy. Harvard Business Review, 73(4), 57-71. 4. Christensen, C. M., & Raynor, M. E. (2003). Why hard-nosed executives should care about management theory. Harvard Business Review, 81(9), 66-74. 5. Christensen, C. M., & Raynor, M. E. (2003). The innovator's solution: Creating and sustaining successful growth. Harvard Business Review Press. 6. D'Aveni, R. A. (1994). Hypercompetition: Managing the dynamics of strategic maneuvering. Harvard Business Review Press. 7. Ghemawat, P. (1991). Commitment: The dynamic of strategy. Harvard Business Review, 69(2), 78-91. 8. Ghemawat, P. (2002). Competition and business strategy in historical perspective. Business History Review, 76(1), 37-74. 9. Hamel, G., & Prahalad, C. K. (1990). The core competence of the corporation. Harvard Business Review, 68(3), 79-91. 10. Kaplan, R. S., & Norton, D. P. (1992). The balanced scorecard--measures that drive performance. Harvard Business Review, 70(1), 71-79. 11. Kim, W. C., & Mauborgne, R. (2004). Blue ocean strategy. Harvard Business Review, 82(10), 76-84. 12. Kotter, J. P. (1995). Leading change: Why transformation efforts fail. Harvard Business Review, 73(2), 59-67. 13. Mintzberg, H., Ahlstrand, B., & Lampel, J. (2008). Strategy safari: A guided tour through the wilds of strategic management. Harvard Business Press. 14. Porter, M. E. (1979). How competitive forces shape strategy. Harvard Business Review, 57(2), 137-145. 15. Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors. Simon and Schuster. 16. Porter, M. E. (1985). Competitive advantage: Creating and sustaining superior performance. Free Press. 17. Prahalad, C. K., & Hamel, G. (1990). The core competence of the corporation. Harvard Business Review, 68(3), 79-91. 18. Rumelt, R. P. (1979). Evaluation of strategy: Theory and models. Strategic Management Journal, 1(1), 107-126. 19. Rumelt, R. P. (1984). Towards a strategic theory of the firm. Competitive Strategic Management, 556-570. 20. Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509-533.

Getting Started

• Template setup
• Basic theme setup
• Navigation bar
• Footer options
• Creating your first post
• Creating docs posts
• Enabling comments
• Google Analytics

Product Features

• Hero page header
• Category boxes section
• Fearured docs section
• Video lightbox boxes section
• Frequently asked questions section
• Team members section
• Call to action section
• Creating a changelog
• Contact form
• Adding media to post and doc content
• Adding table of contents to docs
• Adding alerts to content
• Customization
• Translation
• Development
• Sources and credits
• Contacting support
• Case Studies
• Essays & Term Papers
• Strategy Case Studies
• Marketing Case Studies
• Organization Behavior
• Business Government
• Business Ethics
• Entrepreneurship
• General Management
• Human Resource Management
• Social Enterprises
• Negotiations
• Operations Management
• Information Technology
• Service Management
• International Business

• Order Status
• Testimonials
• What Makes Us Different

Tesco PLC: Fresh & Easy in the United States Harvard Case Solution & Analysis

Home >> Finance Case Studies Analysis >> Tesco PLC: Fresh & Easy in the United States

Tesco, the third-largest retail network in the world, is faced with the problems of with his launch of the new retail a chain in the To increase the of their efficiency, the color of cases should be printed in color. «Hide on John A. Quelch Source: Harvard Business School 21 pages. Date of publication on the site: 11 Aug, 2010. Prod. #: Five hundred eleven thousand and nine-PDF-ENG

[slideshare id=9638628&doc=7532969-tesco-case-study-111010225655-phpapp01] Company overview Tesco is actually a food retail leader in Uk and Ireland. Company’s annual on line sales exceeded $5 billion and Tesco. com is regarded as the world’s largest on line grocer, with a person base of little somewhat less than 1 million and much more than 250, 000 orders completed weekly. Company has not quite 1, 900 vans that operate and about 300 stores and 9, 000 pickers. Tesco. com 2006 sales was raised strongly by 29. 2%.

That he was appointed to the Board on 16 February 1995. He could be a Non-executive Director of Whitbread PLC. That he was in charge of technological area.

Wal-Mart may be the biggest food chain on the planet and contains annual sales eight times larger than Tesco’s.Even though company has been struggling lately it really is beginning to reunite on the right track. Despite predictions that Sainsbury's would regain 2nd position and a narrowing of ASDA's lead lately, the most recent figures released by Taylor Nelson Sofres show Asda's share as 16. 6% in comparison to Sainsbury's at 16. 22%.

Tesco announces a fresh strategic relationship with American supermarket Safeway Inc, to just take the Tesco. com home shopping model to the united states. 2002 – Tesco launches its exclusive clothing brand ‘Cherokee’ in to a lot of its UK stores. 2004 -

6. Challenges Even though Tesco includes a 27% of market share, competitors are always one step behind. With having many of these huge grocer giants which have on line delivery services in addition to offline shops, market was packed and there is a chance and need of expansion in the areas. Tesco thought that when there's any market share left, there's a prospect of growth and expansion. Other challenge in on line selling is how exactly to succeed with no huge expenses. Over 8, 000 services and products will undoubtedly be available from beds and sofas to kitchenware, electronics, cameras, bikes etc. Clients can pick the product they need on a fresh web site or from the new catalogue and order in another of three easy ways: on line, by phone or in selected stores at the brand new Tesco Direct desks. Clients have option for the merchandise to be delivered or found in a selected local stores.

8. Technological drivers of change UK internet penetration by 2007 was nearly 64% and Ireland’s internet penetration is nearly 51%. These results create a clear statement for new and emerging on line shopping market. Tesco. com captured the possible on line grocer market share and reaching for more had not been the very best approach, once you know about huge competitors always staying a step behind. “ Convenience is increasingly vital that you our clients and we think that offering new methods to order and a wider selection of products will undoubtedly be really favored by our clients. ” - Andrew Higginson, Finance and Strategy Director. This new strategy had not been frightening and Tesco took the chance to market non-food stuff like furniture.

9. Creating Value: Economics Of Internet-based Commerce Probably the most value that's being developed by Tesco non-food on line selling may be the good thing about convenience. On line shopping can save yourself hard work and also money for customer. By offering services and products on the net it could slice the transaction costs, labor costs and increase market efficiency. Tesco is well known for low prices therefore the Internet could make those prices even cheaper and create more value for the buyer.

In UK’s grocery store a unitary company such as for example Tesco dominates in every areas – offline and on line. Tesco can be attempting to capture the worthiness insurance firms loyalty programs, membership cards and special deals on its web site.

=======================================================================================

TESCO PLC Case Analysis 2

INTRODUCTION

Tesco PLC holds the best position among food retailers in the uk, with market share that exceeds 15 %. In England, Scotland, and Wales, the business runs 588 supermarkets, 257 which are superstores--stores that sell foods and a selection of other products and services, including gasoline, clothing, housewares, and alcohol consumption. Tesco also operates 32 stores in Northern Ireland and 77 in the Republic of Ireland under various brands, 43 in Hungary beneath the Worldwide and Tesco names, 31 in Poland beneath the Savia name, and 13 in the Czech Republic and Slovakia beneath the Tesco brand. In Northern Ireland, the business also runs 52 Wine Barrel off-license outlets. Tesco may be the largest independent gasoline retailer in Britain; its 288 gasoline stations sell 12. 5 % of the gasoline sold in britain. Recent company innovations are the Club card loyalty card in addition to offerings from Tesco Personal Finance, such as a grocery budgeting account called Club card Plus, a Tesco Visa Card, and a Tesco checking account. Jack Cohen founded Tesco in 1919 when that he started to sell surplus groceries from the stall at Well Street Market, Hackney, in the East End of London (ironically, the marketplace is currently much smaller than in those times; a big Tesco Metro store now sits on the webpage. ) The Tesco brand first appeared in 1924. The name came into being after Jack Cohen bought a shipment of tea from T. E. Stock well. Through the 1950s and the 1960s Tesco grew organically, and in addition through acquisitions, until it owned a lot more than 800 stores. The business purchased 70 Williamsons stores (1957), 200 Harrow Stores outlets (1959), 212 Irwin’s stores (1960, beating Express Dairies Premier Supermarkets to the deal), 97 Charles Phillips stores (1964) and the Victor Value chain (1968) (sold to Bejam in 1986).

COMPANY VALUES

Mission Statement would be to “create value for clients to earn their entire life loyalty. ” Our success depends upon people: individuals who shop around and individuals who use us. If our clients like what you can expect, they're more prone to keep coming back and shop around again. If the Tesco team find what we do rewarding, they're more prone to go that extra mile to greatly help our clients.

CORPORATE, FUNCTIONAL AND WORLDWIDE STRATERGY

Tesco includes a long term business strategy to be able to increase profits, the business has three different dimensions within their strategies, and they are: corporate, functional and worldwide or international. Tesco has 16 stores over the Malaysia 80% of these group profits result from the business enterprise. In accordance with Tesco. com, the main element with their successful plan is they deliver first-class value, choice and convenience for the duration of their customer offer. To generate value for clients to earn their entire life loyalty may be the TESCO core purpose. As a result of this belief, sales have become by 7. 9%. This season they celebrated the fifth anniversary of the best possible brand by expanding the number to at least one, 100 products and services. They will have continued to cultivate the convenience business with a like-for-like growth in ready meals of 23% and lead just how in product development making use of their Healthier Living and Meals for just one range Yet another strategic action that the Tesco have undertaken is what they called Regeneration. This technique is comparable to instituting a store by using the neighborhood community and the neighborhood government relating to the generation of jobs and commerce in specific areas. On the list of areas where Tesco have “regenerated” includes Puchung, Kuala Lumpur, and Simpang Pulai. In this plan, the business places a store in specific areas that they consider as deprived and in dire need of employment. In this manner, they will have instituted a store in a spot where there is little competition and in once increases their reputation on the region by giving jobs for folks locally. More over, this plan also moves their commodities nearer to the general public. Providing the requirements and quality service with their customers may be the functional dimension of Tesco’s business strategy. TESCO introduced over 5, 000 new food lines this season. Yet another innovation is attracting screw-cap wines and their very own label range ‘Unwind’, that is on-track to be always a $5m brand this season. Grab and Go counters have already been introduced in to over 500 stores, offering clients an enormous selection of cheese and hot chicken and never have to queue, rendering it simpler and cheaper to use. Yet another new introduction with their system is Primary Distribution, where they saw great progress this season. Through this process, they could manage product from the factory gates with their distribution centres, improving efficiency and delivering cost benefits they reinvest in customer initiatives. Yet another strategy that TESCO emphasized is within their non-food section. They will have expanded their non-food offer to get their customer’s expectations. As a result of this, they will have a 5% share of Malaysian non-food market. They will have a 16% share of chart music sales, up from 4% five years right back.

In accordance with they're implementing six elements with their global strategy to be able to compete internationally:

Flexibility- Making each market unique and also have different approach. Acting local- Local clients, local cultures, local supply chains and local regulations need a tailored offer delivered by local staff - somewhat less than 100 of Tesco's International team are ex-pats. Keep focus- To function as leading local brand is really a longterm effort and takes decades, not really a couple of years. Be multi-format- No format can reach the entire market. A complete spectrum from convenience to hypermarkets is vital and you also have to have a discounter approach for the duration of. Develop capability- Developing skill in people, processes and systems and having the ability to share this skill between markets will enhance the likelihood of success in challenging markets. Build brands- Brands enable the building of essential lasting relationships with customers

STRATEGIC APPROACH

Tesco may be the biggest ultimate food retailing company on the planet with not quite 2300 stores across global. Tesco operates the buyer banking facility with their customers also it operates on the non-food sector. Tesco changed its technique to change positions in 2008 for the organization responsibility. Tesco includes a build the three stair technique for addressing the climate change in the business. The initial objective would be to decrease the GHG emissions from the operations of the own company. It has defined some legal plans because of its carbon footprint. It really is now reducing the reduction the plans also to committed transparent to attain the specific goals. Tesco includes a 2nd objective that choose technology based era and set the task finished with others and obtaining the profits. This is a better solution for regulations carbon solutions. By this we are able to obtain the appropriate results with in a mean time. The 3rd objective would be to avail clients with the reduced carbon choices and the business y is ready because of this kind of the emissions. In this manner the retailing businesses will get the god result oriented business in international market.

CORPORATE CULTURE

Corporate culture is among the main determinants of success or failure in a small business development practice, since it largely determines how flexible, accepting of change and innovative an organization is commonly. Fairfield-Sonn (2001: 36) provided a four-layer style of corporate culture that included cultural artifacts, cultural history, core ideology and core values that really helps to quantify and describe the organization culture of a business. Hence, Tesco’s corporate culture could be determined from its corporate responsibility statements, which describe its core values and core ideologies in addition to some areas of cultural artifacts.

Tesco’s stated core priorities include:

Ensuring community, corporate responsibility and sustainability are in the center of our business. Being truly a good neighbour and being responsible, fair and honest, considering our social, economic and environmental impact once we make our decisions These values experienced a substantial effect on how Tesco does business, in addition to its financial performance. Tesco’s corporate culture priorities allowed the business to take into account opening stores in areas where indigenous supermarkets were reluctant to go, also to provide services to the region that the neighborhood providers either couldn’t or didn’t consider. Hence, they opened stores in underserved regions, not merely permitting them to express their core ideals, but additionally providing a chance to enter an nearly untapped market. Yet another area where the company’s business development techniques have both impacted and been influenced by the organization culture may be the introduction of lines of natural, organic and free-range foods to its stores from the 1990s, and continuing in to its development of the Nature’s Choice sustainable production lines within the last couple of years. These lines, such as organic fruits, veggies, meats along with other proteins, milk products, free-range eggs along with other responsibly produced goods, has increased its importance lately to the company’s important thing because of growing knowing of environmental facets by clients. But this provision can be mandated by the company’s corporate culture’s core ideals, especially those of environmental responsibility and awareness. These ideals entered the organization culture in the mid-1990s, at a comparable time because the first environmentally aware life style product range (that of free-range eggs) was introduced. If the shift in corporate culture inspired the change in development strategy or if the shift in development strategy inspired the shift in corporate culture certainly is really a chicken and egg question!

SWOT ANALYSIS OF TESCO

Strengths : -

TESCO have secured commercial standing within the worldwide market winning Retailer of the entire year 2008 at the “World Retail Awards”. This is useful for marketing campaigns to operate a vehicle advantage towards the demographic base for future growth and sustainability. Within an environment where worldwide retail sales are showing decline or level performance on a like for like basis TESCO Group have published sales gain of 13% for UK markets and 26% growth in international markets. As a small business searching for continued expansion TESCO have reserve funds of credit in conjunction with income produced from property portfolio development funds.

Weaknesses: -

TESCO Finance profit levels were impacted through bad debt, charge card arrears and household insurance claims. TESCOs position as a cost leader in UK markets can result in reduced income to be able to wthhold the key price points on will need to have commercial items. Grocer outlets are not setup to use as specialist retailers in specific regions of product which may be capitalized on by other smaller bespoke retailers. Whilst current fiscal conditions suggest TESCOs key value message will succeed there's a weakness in non-essential, mid to high ticket price goods that are affected from the rising cost of living and lower disposable incomes.

Opportunities: -

Statistics suggest TESCO may be the third largest worldwide grocer which indicates an even of shopping for capacity to ensure main-stream economies of scale. The acquisition of Homever supplies the possibility to develop the brand through Asia, specifically South Korea and additional grow International markets for the group. The development of Tesco Direct through on line and catalogue shopping will grow the usage of technology, providing the launch pad for larger nonfood based services and products with moderate to high margin returns and less concentrate on sales and margin per foot go back to space. TESCO mobile have become ¼ million clients in 2008 and moved in to profitable status suggesting further growth and development in this technological area could be developed.

UK and American markets have already been suffering from economic concerns through the “credit crunch”. Lower available income will impact and strategic focus might need to change to lessen priced basic services and products with less concentrate on more costly brands suggesting a switch in cost architecture. Rising raw material costs from both food and non-food will impact income over all. Sourcing changes to Asia locations with regards exporting restrictions on some non-food product areas will certainly reduce margin rates on services and products with already low margins. Changes to consumer buying behaviors require further analysis - as technology develops consumer buying patterns change that may bring about product areas requiring evaluation. For TESCO there's a persistent risk of takeover from the marketplace leader Wal-Mart who has both means and motive to pursue such action

PORTER’S FIVE FORCE MODEL ANALYSIS

INDUSTRY COMPETITORS: -

First, there's a have to identify Tesco’s industry competitors.The aforementioned conditions all connect with the arena of retailing industry where Tesco plays, hence the larger dependence on the firm to spotlight strategic management to be able to gain competitive advantage over their competitors.

POTENTIAL ENTRANTS: -

The economies of scale, for example, means that the more scale economies, the less risk of entry for the reason that if entrant can't quickly get large market share , it has a significant cost disadvantage. Incumbent can additionally threaten to improve output and low cost. Potential entrants will see that barriers are imposed in it, either explicitly or implicitly, by the conglomerate incumbents. Usage of distribution channels may also prove harder for individuals who desire to enter the. Because the incumbents have previously cornered the more prevalent distribution channels, it'll be difficult to both contend with the already established chains in the distribution channels to check out new channels with which to dispense of the retail services and products.

The leverage and bargaining power of clients are usually relatively greater when clients are few in numbers so when they purchase in large quantities so when customers’ purchasers represent a big percentage of the trying to sell industry’s total sales. In the retailing industry, the amount of customers is quite large, and frequently, they don't purchase in bulk. Out of this alone it could already be said that the bargaining power of consumers in weak. Once the supplying industry is made up of many relatively small sellers so when that being purchased is sufficiently standardized among sellers that clients will maybe not only find alternative sellers however they may also switch suppliers at virtually zero cost, the buyers’ buying power is strong. When it's economically simple for clients to get the input from a few suppliers instead of one, their power also increases, which will not happen in this specific industry, since it is less expensive to get in one retailer than from the host of retailers.

SUPPLIERS: -

Several supplier firms has more bargaining power once the input is, in a single way or yet another, vital that you the customer so when the supplier industry is dominated by way of a few large producers who enjoy reasonably secure market positions and that are maybe not beleaguered by intensely competitive conditions. In Tesco’s sort of industry, they will have the extreme benefit of having the ability to dictate the purchase price they are ready to pay the supplier, because the suppliers, if the retailing giants won't pay the formers’ price tag, will undoubtedly be left without someone to sell to save lots of the tiny supermarket chains, which may not be considered a wise move ahead the suppliers’ part. that is clearly false, thus it could be deduced that suppliers usually do not exert just as much power because they could have liked to. Switching in one supplier to some other will never be expensive for a retailing giant such as for example Tesco. Actually , as suppliers, they'll be clamoring for the firm’s focus on choose them as supplier when the business decides to change suppliers.

SUBSTITUTES: -

In the retailing industry, as stated above, there are a lot of competitors. This level of rivalry may be the main force that drives the costs of most companies on the market down. Like Sainsbury can match the reduced prices that Tesco offers on the market and also equal the grade of the merchandise they offer, making the substitute force saturated in the retailing industry where Tesco operates. Further, your competition from substitutes is suffering from the ease with which buyers can transform to an alternative, an integral consideration being that always the buyers switching costs-the one-time costs facing the customer in switching from usage of something to an alternative for this, is low. Since switching in one chain to some other will generate a comparatively low priced or fuss for the buyer, the substitute force on the market is relatively high. This opens an avenue for Tesco to boost quality and differentiate from their competitors while driving down costs at exactly the same time.

Related Case Solutions & Analyses:

Hire us for Originally Written Case Solution/ Analysis

Like us and get updates:.

Harvard Case Solutions

Search Case Solutions

• Accounting Case Solutions
• Auditing Case Studies
• Business Case Studies
• Economics Case Solutions
• Finance Case Studies Analysis
• Harvard Case Study Analysis Solutions
• Human Resource Cases
• Ivey Case Solutions
• Management Case Studies
• Marketing HBS Case Solutions
• Operations Management Case Studies
• Supply Chain Management Cases
• Taxation Case Studies

More From Finance Case Studies Analysis

• India Faces a Power Failure: U.S. Financial Service Company Expansion Plans
• Note on Venture Capital
• IMD MBA Venture Projects: Applied Biomedical Intelligence (ABMI)
• Quantitative Marketing
• Performance Measurement with Factor Models
• The Long and Short of Apollo Group and the University of Phoenix (A)
• Bay Partners (B) (Abridged)

Contact us:

Check Order Status

How Does it Work?

Why TheCaseSolutions.com?

Twenty Lessons Learned From Tesco's Fresh & Easy Failure

Jim Prevor's Perishable Pundit Deli January 9, 2013

The year 2012 closed with the announcement that Tesco will probably exit its US business, Fresh & Easy. Obviously it will sell it or parts of it if it can. It may contribute assets to a joint venture or may just put a lock on the door. Although Tesco claims some have expressed interest, it noticeably did not reassure investors that it would not have to wind up writing a check to exit the business.

The year 2013 gives us the opportunity to draw business lessons from the debacle in the hope that we may do business better ourselves.

We’ve written a great deal about Fresh & Easy, and you can review these articles here .

To our regular readers, the failure of Fresh & Easy will come as no surprise. But it is a surprise in this sense: When we initiated our analysis of Fresh & Easy, we were told, more than in any other situation, that Tesco would get it right. The more we pointed out that they got it wrong, the more we were assured that we were underestimating Tesco.

So here is a large, well-capitalized organization, widely respected for acumen in retail and its ability to work cross-culturally, working on a high priority project… yet it just blew almost two billion dollars and had a very high profile failure.

Why did it fail? What lessons can be drawn from this failure? Let us count the ways:

1) Don’t Let Investment Bankers Dictate Your Strategy.

The initiative to open in America came from the City in London (that is London’s Wall Street) warning Tesco that it was starting to grow substantially in developing countries and that as a larger percentage of sales and earnings came from developing countries, Tesco’s price/earnings ratio would decline.

The City thus was urging Tesco to move into the United States as this is the largest developed market in the world. Further, because both Marks & Spencer and Sainsbury’s had failed in acquisitions in the US, Tesco was told that an acquisition would not be well received.

In one of the statements that Tesco CEO Philip Clarke made explaining the decision to pull back from the US market, he said:

Launching Fresh & Easy in the world’s most competitive retail market was never going to be easy, but the economic backdrop made the task twice as hard.

As Chief Executive of Tesco, I have to focus on those markets which can deliver the high returns which our shareholders rightly expect. Where they don’t, it’s my job to take action, as I did when we pulled out of the Japanese market earlier this year. These decisions aren’t easy, but making the tough calls at the right time is a vital part of the Chief Executive’s job.

Having assessed its long-term potential, we’ve concluded that Fresh & Easy is not going to achieve the scale and profitability it needs in a reasonable timescale.

The truth, though, is that precisely because the US is highly developed and “the world’s most competitive retail market,” there was never a likelihood that it would be one of those “markets which can deliver the high returns which our shareholders rightly expect.” Even if successful, it was going to be only modestly profitable.

This is a case where the operational activities were dictated by non-operational considerations. This is the kernel from which the later failure would grow.

2) Don’t Require Researchers And Consultants To Conform To Pre-Established Outcomes.

It has been pointed out that Tesco did extensive consumer research, even living in the homes of Americans to understand their eating and shopping patterns. This is true, but the early-stage research that led to core decisions, such as the size of the store, was constrained by Tesco’s situation.

Tesco is a very large company. It needs to do things on a large scale or they are probably not worth doing at all.

Since the decision had already been made that Tesco had to open in America and that Tesco could not do an acquisition, the researchers and consultants were constrained in their recommendations. Had they decided that what Americans truly want is to buy food in 70,000-square-foot boxes on prime suburban corners, this would have been a grave problem for Tesco.

These locations are all taken. The little new construction that exists for these types of locations would find Tesco in deep competition with every supermarket chain in each city. It would probably take a century for Tesco to acquire a critical mass of these locations without an acquisition. So it would have been unacceptable for the researchers and consultants to recommend this option.

Equally, had the researchers decided that what Americans really wanted was to buy their food in one-stop-shop supercenters of 200,000-square-feet, similar to the Wal-Mart box, Tesco would have found this problematic. After all, every time anyone proposes to build such a box, they get a lawsuit; they get extended zoning negotiations; they run into legal obstacles, etc. Once again, to build a critical mass of these stores would take a very long time.

In light of these constraints, it is not surprising that the researchers and consultants came to the conclusion that Americans did not, in fact, want to buy food from stores on prime suburban corners, nor did they want to buy food in large supercenters. Instead the researchers concluded that Americans wanted to buy their food in old Rite-Aid drug stores!

These 10,000-square-foot locations had the advantage of being widely available, and developing them did not pose the legal and zoning problems of more conventional locations. But it is easy to identify a hole in the market. The question is whether there is a market in the hole. There was never any evidence that the mass of Americans were actually looking for this small footprint option.

Here, Tesco so leaned on its researchers that it never really got the truth. It just got the truth it wanted.

3) Avoid Massive Overhead On An Unproven Concept — Maintain Flexibility.

Before Tesco opened one store in America, it built a massive distribution center, brought in a large staff of expatriates to manage the operation and enticed key British vendors to build US facilities.

This created tremendous overhead, which created tremendous pressure to open stores quickly, which, in turn, created tremendous pressure to accept sub-par locations.

In a developed market, the limited availability of prime sites is a natural constraint on growth. What you want to do as a retailer is establish strict criteria for your locations: How much foot traffic? How much auto traffic, population density, disposable income, etc. These tough standards mean that you will turn down almost all the locations that come your way. It also means that you will accept only locations that are likely to be profitable.

Fresh & Easy was caught at birth between a rock and a hard place. If it grew slowly, accepting only the best locations and gradually learning from shoppers what worked and didn’t, it was destined to lose a fortune because it had to support this enormous infrastructure it had developed before opening the first store. On the other hand, if Fresh & Easy pushed to grow rapidly, to quickly achieve a scale that could support the infrastructure, it would be forced to accept loads of rotten locations.

Tesco put itself in a “heads you win, tails we lose” situation.

Contrast this with the approach Wal-Mart took when it opened its first supercenters. It contracted with wholesalers and various intermediaries to manage its food supply chain. Possibly Wal-Mart overpaid a little on a case-by-case basis, but the company freed itself to grow at a pace dictated by store performance and site availability.

Wal-Mart also postponed major capital investments in distribution facilities until the company actually knew what was needed.

This failure of Tesco to maintain flexibility doomed what was really a small start-up retailer.

4) Maximize Local Market Knowledge By Using Local Executives And Vendors.

If you are opening a retail store in a developing country, you will need a great deal of expatriate labor. This is because the personnel available in the country do not have the skill-set trained to do things such as food safety or to implement sophisticated supply chains.

If, however, you are opening a chain in an advanced western society such as the United States of America, you want to tap into all the local market knowledge and experience.

You want buyers who know the vendor community, real estate people who have relationships with developers and know the neighborhoods like the back of their hands. You want vendors who are tapped into what is selling around the country.

We can understand that a company might like to send one of its own over as Chief Financial Officer to watch the money, but other than that, there was really no cause to have any British executives in the US.

Equally, pushing UK suppliers to open in the US was counterproductive. At an early stage in the Fresh & Easy adventure, we ran a letter pointing out that the first Fresh & Easy stores devoted 25% of its fresh-cut salad assortment to watercress-based salads.

These are, of course, very popular in the UK, but are virtually never eaten in the US. Indeed neither Fresh Express, nor Dole, nor Ready Pac even produced such a product in their extensive lineup of salads.

Fresh & Easy management knew this, of course, but they didn’t know it in their bones, and their lack of local knowledge — at the processing level, at the procurement level, at the merchandising level — all led to the creation of stores that were not in sync with American expectations and thus were likely to fail.

There was also more than a bit of arrogance here — “We know what those Americans should be eating!”

5) Remember That Equity In The Marketplace Is Typically Built In Stages.

When Bruce Peterson launched Wal-Mart’s produce program, he had already been instructed by none other than Sam Walton that he should realize he was building a program for what would become the world’s largest grocer. Yet, he approached the task with humility. Bruce recognized that Wal-Mart, though well known for general merchandise, had no equity with consumers on fresh produce, so he resolved to carry well-known and respected produce brands. In other words, he wanted to borrow the brand equity of his vendors to woo consumers.

It would be hard enough for an unknown brand such as Fresh & Easy to tempt consumers to its stores; Tesco compounded this by stocking the stores with unknown private label product.

Even if the ultimate plan was to sell mostly private label, it would have been wiser to open the stores with all or almost all branded product. If the shelves were stocked with well-known brands and Fresh & Easy was able to offer a value proposition — more convenient stores or lower prices — it would have had much more business.

True, the low-price strategy might not have been profitable, but neither was having a lot of product that didn’t sell very much.

If Fresh & Easy had lots of customers buying a bit too cheap on Heinz ketchup and Best mayonnaise, then in time Fresh & Easy could have introduced these customers to more profitable private label items.

Yes, Trader Joe’s is almost all private label — but they didn’t introduce their first private label item — granola — until five years after they opened, and the private label assortment as it exists now has developed with over 40 years of consumer input.

Tesco tried to do too much at one time.

6) Don’t Start Out By Creating Reasons For Consumers Not To Like Your Business.

Fresh & Easy opened without accepting American Express or manufacturer’s coupons, or allowing for standard check-out. Doubtless there are real reasons why Tesco felt these would not ultimately fit with its concept. Once again, though, the smart thing would have been to meet the competition on all these aspects and then reassess once Fresh & Easy had won over customer loyalty.

So, maybe AMEX charges an extra point over Visa. If certain consumers prefer to use the card, and perhaps the business model won’t allow for that extra point, still you open up accepting it, let lots of customers who prefer AMEX switch from Vons or Ralph’s or Whole Foods and consider that extra point marketing. Then when you have them as customers, you either renegotiate with AMEX or ultimately phase out AMEX — but you do that after the consumers love you.

Some decisions are hard and some are easy — if you want to know what credit cards to accept when you are entering a new market, the answer is easy: you accept every card your competitors do and if you can take an extra one, that is even better.

Tesco acted as if it were Tesco in the UK — already very successful — rather than acting as if it was a nobody in the US scrambling to gain a foothold in the market.

7) Be Nice!

Few people or businesses succeed all alone. One never knows who will be able to help or when they will be able to help. As such, it is prudent to make the small gestures of comity to the vendor community even if, at that moment, you have no particular plans to use that vendor.

In the early days of the venture, Tesco’s behavior can only be described as downright rude and offensive. We were getting phone calls from the owners of key grower/shipper organizations asking us if we could hook them up with the right person at Fresh & Easy. These were the top two or three vendors in their products and the kinds of reputable growers and shippers that, almost surely, Tesco would have wound up dealing with if its venture in the US had even the slightest success.

But these owners and CEOs were literally treated as if they were persona non grata . Simple questions — who is going to buy the lettuce — were met without a response. Important people were insulted and told to drop off their brochures at an office and that Tesco would call them if they were interested.

Once the project got under way, many of the buyers were profoundly offensive. We wrote a piece here about how a buyer rudely ordered expensive wine at a vendor event and refused to pay for it, despite promising to do so.

If you are the biggest buyer in the country, as Tesco is in the UK, you can get away with a lot, but if you are a struggling nothing, as Fresh & Easy was in the US, then building positive relationships is a key job.

There was this unwillingness to conform even temporarily to American customs. For example, Tesco was asked by many vendors to join the Produce Marketing Association, the United Fresh Produce Association and the Fresh Produce and Floral Council, and we pointed out in many pieces, including this one , why this was a good idea.

Partly this was substantive; Tesco might have learned from participation in these organizations and found sources for new employees and vendors.

Mostly though, the problem was a cultural one in which Tesco wished to impose its standards on America. Instead of saying cum Romano Ramanus Eris — when in Rome do as the Romans do — Tesco wanted to change American habits and customs.

It is not really very difficult. If we were to open a chain in the UK, we would ask what associations do Tesco, Sainsbury’s, Marks & Spencer and Asda belong to and we would join as well. Maybe, after we were well established we would find we weren’t getting value and quit, but initially we would want to be seen as the civic-minded guy supporting industry institutions.

In the end, Fresh & Easy had few friends who were motivated to save it — that may well be why it was not saved.

By the way, the same rudeness was exhibited to reporters at major consumer newspapers and TV stations. We got calls from many asking why Fresh & Easy and Tesco executives wouldn’t return phone calls. We could say the behavior was rude, and it was, but mostly it was stupid. These reporters influenced the prospective customers and they never gave Fresh & Easy the kind of glowing response that would have helped the chain. That may well have been because of how these reporters were treated.

8) It Was Not Fresh And Not Easy: Make Sure Those Who Are Executing Based On Research Understand What The Consumers Were Saying.

Consumers say many things, but it requires great expertise to actually interpret those proclamations. So, for example, consumers might say they want Idaho potatoes for dinner but knowing that doesn’t tell us whether the consumers want a potato grown in the state of Idaho or, simply, a long white baking potation.

Yes, consumers wanted things fresh, but the execution delivered product that Americans did not perceive as fresh. Generally speaking, Americans perceive things as fresh when they are A) variable and, if appropriate, B) cooked at the location and served warm.

In other words, no matter how high the quality of the bread, meat and cheese, Fresh & Easy’s sandwich program would be perceived as vending machine food because the consumer could not customize the sandwich. At most supermarkets, the consumer can say, heavy on the mayo, an extra slice of provolone, some jalapenos, please, etc.

Same thing with rotisserie chicken. In most stores, a consumer sees it cooking, smells the aroma and takes it home hot. At Fresh & Easy it was cooked in a distant commissary, served cold in a plastic bubble.

Tesco knew the consumers wanted fresh, but it delivered an experience that Americans would not perceive as fresh.

Similar confusion exists over the term easy. It seems that Tesco leapt to the conclusion that small would equal easy. It turns out that this is true for only small subsections of the population — notably students and elderly people or urban dwellers who do not have a car. For most shoppers, as Kroger CEO David Dillon caught on right away , a small store that carries mostly private label product was simply an additional stop for the typical suburban mom. It was not easy; it was hard because now the kids had to be dragged to another store, unbuckled from their car seats, etc.

So Tesco knew consumers wanted “fresh” and that they wanted “easy,” but they didn’t understand what American consumers meant when they used these terms.

9) Don’t Be Logistics-Driven; Be Merchandising-Driven. Either Open Stores Only Where The Demographics Suit Your Concept Or Customize Merchandising Assortment To Meet The Needs Of The Local Community.

Inconceivably, the decision was made to offer a uniform merchandising assortment against diverse demographics. So the store in upscale Scottsdale, Arizona carried exactly the same assortment as the one in Compton, California. This guaranteed poor results.

This is a big, diverse country. Get lazy on assortment, and you might as well close up your doors. Which is, of course, what Fresh & Easy is doing.

10) Don’t Fall In Love With Your Technology.

In the early days, Fresh & Easy was plagued by out-of-stocks. It was believed that this was due to a sophisticated ordering system that was functioning poorly due to a lack of historical data. But Fresh & Easy only had a few dozen stores at the time. One vendor suggested that Fresh & Easy equip each store with a clipboard and have the store manager call in all the out-of-stocks every day so they could be delivered the next.

This eminently sensible suggestion was treated as an insult to Tesco’s IT department, and the stores struggled through months being out of stock on lots of stuff. This not only cost business but alienated consumers at a crucial moment. There are few things more frustrating to a consumer than going through the effort of taking a trip to a store and that store not having product it would normally be expected to have. That certainly makes shopping hard, not easy.

There are many reasons Fresh & Easy’s sales never took off, but the fact that the chain alienated so many customers with out-of-stocks in its early days may play a greater role than is realized.

Tesco has enormous resources. It could have made sure there were no out-of-stocks. It could have sent a regional manager to every store every morning and then load a minivan at the DC to quickly stock up. But Tesco was so focused on its systems, the company forgot about the customers. That can easily be the kiss of death for a retailer.

11) Allow Your Own Team To Weigh In.

There has been much written about Tesco’s unwillingness to trust outsiders and thus the bizarre decision to bring in so many Tesco executives to work at Fresh & Easy.

What is less realized is that Tesco didn’t actually trust its own senior staff. As the interest in Fresh & Easy grew, we started getting phone calls from senior Tesco executives. These people were the chief executives for Tesco’s operations in various countries.

They wanted to question us on Fresh & Easy. When we inquired as to why such a senior Tesco executive would need to call the Pundit to get information on Fresh & Easy, it was explained to us that information on the project was shared on a “need to know” basis, and since they didn’t “need to know,” they were told almost nothing.

The problem with this is that these were very astute people with great expertise in retailing, and they had no vested interest in the decisions that had been made regarding Fresh & Easy. Had Tesco been open to the constructive critique of its own staff, there might well have been enough of a counter-weight within Tesco to question some of the decisions being made and thus obtain a better outcome.

12) Don’t Abuse Your Business Partners.

Fresh & Easy made a big point of selecting individual vendors to lead various categories, and there were specific and unusual requirements ranging from how much a clamshell of grapes should weigh to the measurement of an artichoke stem.

Most of these requirements were silly because they did not add value that the consumer perceived, but they did add expense.

In addition, these exacting requirements constrained the supply chain and thus precluded Fresh & Easy from taking advantage of ‘special buys’ that become available due to market conditions.

Still, this was the decision Fresh & Easy made and, perhaps, working closely with a limited number of excellent vendors would lead to success.

Except when times got tough and Fresh & Easy wanted to offer value items, it abandoned its vaunted specifications and bought product on deals. Now Tesco didn’t sit down with its selected vendors, explain the situation and offer them an opportunity to provide standard product at a lesser price. Tesco just went around their backs and bought product.

We were touring more than a few stores with vendors when they would be shocked to see a skid of competitors’ product on the floor when, supposedly, they had an exclusive.

For the most part, this made the vendors hate Wild Rocket and Fresh & Easy, and when one is in trouble, one needs friends. Fresh & Easy didn’t have many.

13) Don’t Fake Your Liabilities And Thus Underestimate The Risk You Are Taking.

One of the reasons Tesco got in so deep is it pawned off on vendors many of the costs. If this were legitimate, it would constitute risk-sharing and might have been a wise strategy.

But, in fact, when the business turned out to be too small to support the British transplants, Tesco bought them out at a huge premium to free market value. We ran a piece here , in which we pointed out that this seemed to likely be the result of an agreement, either explicit or implicit, that Tesco would make these guys whole.

Because Tesco is so large, these things get lost in the shuffle. Had it just been Fresh & Easy doing this, shareholders would have filed suit claiming that management had taken on liabilities that were not properly disclosed.

Another question is whether these potential liabilities were disclosed to Tesco’s own board of directors? Maybe not and, as such, the board was kept in the dark about the extent of the investment the Fresh & Easy project would entail.

No board is better than the information it has, and it is difficult to make wise decisions if liabilities are being assumed based on a wink and a handshake.

14) Secrecy Is No Substitute For A Competitive Edge.

Many of the difficulties Fresh & Easy experienced came about because of the attitude expressed by then Chairman Sir Terry Leahy when at the launch of Fresh & Easy he expressed that “this is a roll-out, not a trial.”

It was always an odd way to proceed. Few retail concepts spring from the minds of geniuses and proceed to serve the consumer in an unaltered state. Much more common is for retailers to launch concepts and to refine them based on consumer feedback. What sells? What doesn’t? What do people ask for?

But Fresh & Easy was reared in secrecy, researched in a mock store built on a sound stage. Then, it was sprung to life, fully formed and rolled out.

There were enormous efforts made to keep things secret, including mock names and no prototype store open to the public.

Self-confident retailers don’t worry all that much about secrecy because they believe they have a competitive edge in what they do.

Look at Wal-Mart’s launch of the supercenter. The company opened one store. The whole world came to see it — every retailer of any size — and whatever these retailers learned from visiting that initial supercenter had virtually no impact on Wal-Mart’s ability to grow the concept.

Indeed, long after it became clear that supercenters were a very successful concept, most retailers did almost nothing. Kroger bought Fred Meyer, but did not attempt to roll the chain out nationally. Nobody bid sufficiently aggressively to acquire Meijer. And major retailers such as Safeway did not develop a supercenter concept.

Obviously, Wal-Mart believed it had had significant competitive advantages in developing supercenters, and the behavior of other retailers in not developing their own such concepts indicates they were correct.

The very fact that Tesco thought secrecy was so important in launching Fresh & Easy was a sign that the concept was weak. If it could be so easily copied, then it would be copied if Tesco had the slightest success.

Indeed, the failure of Fresh & Easy turned out to be a matter of lack of demand. But it could have been a failure in another way.

If by some miracle Tesco had discovered some hitherto unknown demand for purchasing groceries in 10,000-square-foot boxes, the very availability of such real estate would likely have led to an explosion of such stores.

The competition would have been intense because it would not have been restrained by real estate and zoning issues. In addition, such small stores could be opened at a reasonable cost and so individuals of all ethnic groups might jump into the fray.

In fact, such small stores, if successful, might not be profitable for a large corporation to operate at all.

The bottom line is that, in retail, if you believe your concept is so easily duplicated and your edge so weak that knowledge of your concept would allow others to dominate the field, that is a good sign that it is not likely to be a highly profitable concept.

15) Make Sure You Have The Right Person For The Job.

Tim Mason was widely heralded as a genius when Tesco sent him over to the US to head up the launch of Fresh & Easy.

He was held in such esteem, however, principally for his development of Tesco’s loyalty program.

This program was not available for Tesco to use in the US, because it was developed with Dunnhumby , with whom Kroger has an exclusive in the US. So the very tool which was supposedly crucial to Tesco’s UK success was not available for use in the US, and no substitute was ready for opening.

But there was also a question, brilliant or not, as to whether or not Tim Mason was the right man for this job.

Part of the issue was experience. Whatever his achievements, he had never opened a supermarket chain or any business. He was a high-end corporate executive sent to do what was, really, just a start-up.

Part of it was personality. He did strange things. He would tweet about off-topic things. The London Evening Standard wondered if “ the pressure of running Tesco’s loss making US business is getting to Tim Mason? ” — when he bizarrely started tweeting about his habit of hitting the delete key rather than the “m” on his iphone as if he was a 20-year-old with nothing to do but send out random tweets.

And he seemed to have a tin ear for how things were perceived. Everyone who dealt with him had the same comment when they spoke to us: He was always out on a yacht enjoying southern California. They always had to reach him on the boat.

This was a guy running a struggling start-up. This requires super-human efforts of all involved and tremendous self-sacrifice. It requires leadership that sets a standard for hard work and deferral of gratification. At very least, it requires leadership that has the good sense to keep to oneself your extravagances.

And everyone kept talking about Tim Mason and the yacht in the same sentence. That can explain the failure all in itself.

16) Compensate People To Achieve The Goals You Want Them To Achieve.

When Tesco decided to send its dream team to America, it had an opportunity to set up a compensation plan.

It was elaborate and complicated. It involved giving Tim Mason a 2 million-share grant in 2007 under the United States Long Term Incentive Plan, which ultimately lapsed when he was given broader corporate responsibilities and withdrew from the plan.

He did receive a £4.3m payout in 2011, which led to great criticism since Fresh & Easy was such a failure.

And he will receive £5.7m following his departure, plus a £9m pension plan.

We begrudge no one their income, but we do think that compensation plans focus the mind on achieving different goals.

Mr. Mason was a rich man before he came to America, and if the offer made to him was that he would have the opportunity to work for $1 a year but would receive 20% phantom equity in the Fresh & Easy project, the results might have been different. For example, if in 10 years’ time, an appraiser would value the company, or a formula for valuation would be agreed to now, and Tesco’s investment, including an agreed return on investment, was deducted and Mr. Mason would be entitled to a payoff equal to 20% of the value he created by building the chain, we suspect the whole project would have been done differently.

There would have been a desperate attempt to reduce Tesco’s capital investment because that would have been a key criterion in the personal return Mr. Mason could earn. We doubt that distribution center would have ever been built.

As it was, the compensation program was a sort of guaranteed high base with an extra bonus if things go well.

Had Mr. Mason been looking at years of working for a $1 a year with no return, he would have been less likely to allow the project to fail in the way it did.

17) Make Sure Your Promotions Attract The Kinds Of Customers You Hope To Keep.

The general rule in consumer marketing is that your efforts to get new customers need to match your efforts to retain them.

So magazine subscribers who purchase through sweepstakes typically renew best through sweepstakes.

Equally, when a retail business is confronted with a lack of customers, the thing to remember is that you need to promote in line with the kind of customer you hope to ultimately attract.

Fresh & Easy decided to heavily use dollars-off coupons. There were many variants, but a typical one was a $5 off each $20 purchase.

The hope, of course, was to introduce consumers to Fresh & Easy through the discount and then have them stay on as customers at regular prices.

In fact, the coupons became like crack/cocaine. They would boost sales but as soon as Fresh & Easy stopped couponing, it was like withdrawal symptoms — sales would crash.

The food is the cheapest thing, so normally promoting with discounted food can make sense — but you will attract customers who are focused on discounts. To keep those customers, you need to remain deeply promotional.

But we never found Fresh & Easy to be particularly well-priced. When we did our PRODUCE BUSINESS Wal-Mart Pricing Study in Los Angeles, California, we studied their pricing and it turned out that Stater Bros, Ralphs, and Vons plus Wal-Mart were all less expensive then Fresh & Easy when it came to fresh produce.

This being the case, deep discount couponing only brought in customers who would be dissatisfied with Fresh & Easy. They would have been more successful deciding who the customer was going to be and skewing the marketing to that person. Were they looking for Moms? How about a program where 2% of your purchases go to the school you specify?

Or maybe the money needed to be spent on a comprehensive image-building campaign to tell people what Fresh & Easy was all about. In the end, as at the beginning, this was a mystery to most consumers.

18) Know Your Center.

One of the more consistent critiques of Fresh & Easy is that its stores were cold and institutional. This contrasted especially with Trader Joe’s, whose stores are warm and give its shoppers a real sense of place.

Fresh & Easy tried to address this problem with a new décor package, but it didn’t make much difference.

The stores lacked sense of place because management never knew what they wanted the store to be. This is mostly because to decide would have been to exclude. In other words, if you go to an Aldi and complain that the produce is dishelved because they put it out each day and let it run down, they don’t apologize and try to make it better. They tell you to come at 8:00 AM when it is just put out. If that doesn’t work for you, they suggest you find another store.

That attitude — that fierce dedication toward discounting — informs the entire shopping experience. Trader Joe’s, with its Trader Shtick, has a similar rootedness. Fresh & Easy was unwilling to say that anyone shouldn’t be their customer. That is why, in the end, nobody will be their customer.

19) Don’t Kid Yourself As To The Source Of Your Problems.

Throughout the experience, Tesco has consistently blamed the economic crisis of 2008 and its aftermath as the cause of its problems with Fresh & Easy. This has never been true and never made much sense.

One thing Tesco has is financial resources. This means it has an enormous edge over businesses that do not have resources during a financial crisis and depressed economy.

A recession makes available locations and talent that would not normally be available. It would normally be an excuse for a company such as Tesco to put pedal to the metal and drive poorly financed independents out of business.

What is required, of course, is a viable concept.

We used to think these pronouncements were just sop for the shareholders, but, more recently, we came to think that top Tesco executives actually believe that had the economy been stronger, this concept would have succeeded — despite there being no basis for such an assumption.

The power of self-delusion is a major fog preventing business success.

20) Be Open To Criticism And Avoid Groupness.

Of course, all of the first 19 points we mention as reasons for the failure of Fresh & Easy beg one question: Why didn’t they fix it?

Mistakes happen, errors are made, generals always fight the last war — but these were smart people, with enormous resources and the really interesting thing here is that they didn’t turn it around.

Why? Well the obvious answer is that they were unwilling to listen to criticism.

We wrote a lot about Fresh & Easy , and the pieces were very well received, not only amongst our core industry readership but beyond. We were invited to speak on the BBC — in fact we were invited to debate with Tesco but Tesco declined. We were quoted in more than 100 media outlets.

But there was a more serious side. We were paid by many of the world’s top investment banks to give our analysis of the situation. Citicorp had us do a conference call with its investors around the world to discuss Fresh & Easy. It also had us keynote its European Retail Conference for the same reason.

Several of Tesco’s biggest competitors brought us in as a speaker to address the top management team and, in some cases, even the board of directors, on Tesco and Fresh & Easy.

On more than one occasion, Tesco vendors approached us and asked if we would be willing to address various Tesco meetings, as they wanted Tesco to succeed and thought our critiques had been prescient so they wanted to suggest us to their Tesco contact. We agreed each time. Yet the invite never came.

We mention all this to point out a few things: First, our analysis was very credible and taken seriously by very serious people. People who had millions riding on Tesco stock, vendors who had millions in business riding on the success of Fresh & Easy; journalists who had a choice of analysts to speak with. Since we were almost exactly correct on almost everything, we repaid this trust in the best possible way.

Second, we had real influence. People bought and sold Tesco stock based on our conference calls and our analyst meetings.

For both these reasons, it was peculiar and telling that the one group that never reached out was the management team at Tesco and at Fresh & Easy.

At very least, their purpose in reaching out would be to co-opt us, build personal relationships, etc., in the hope that we would be more generous in our assessment.

More importantly, they — and this applies to the California-based management team, the executives in London who were supervising this project and the board of directors that was supporting and funding it, would actually learn something and thus head off disaster.

Why they did not is best explained by a phenomenon that psychologists call “groupness,” which is explained in a great essay in the National Geographic Blog — much of it focusing on why A&P couldn’t sustain its leadership position and why NASA had the Challenger and Columbia tragedies:

Behavior like that, seemingly contrary and nonsensical, stems at least in part from a phenomenon that psychologists call “groupness.” Coined by a social psychologist at Oxford University named Henri Tajfel, the term refers to the tendency of various animals, including humans, to form in-groups.

When the in-group encounters individuals from outside the group, the default response is hostility. People protect their group from outsiders and from outside influences. For example, we will reject information, habits, and culture from other groups.

The power of groupness is not to be underestimated. If a group invests a lot of effort in a goal and succeeds, its boundaries become stronger, and it tends to become even more hostile to outside influences. This may not be overt hostility. It may simply be a subtle and unconscious tendency to reject anything from another group.

NASA has lost two space shuttles, costing the lives of 14 crew members, and groupness was at least partly to blame. The astounding effort and success of the Apollo program had created a culture… NASA defined itself as technically excellent — “the perfect place,” as one researcher called it. They put a man on the moon, and it was hard to argue with success. The insidious message was: We know what we’re doing. The corollary to that is: You can’t tell me anything I don’t already know.

By the time components of the space shuttle began failing (the O-rings in the case of Challenger and the foam insulation in the case of Columbia), NASA managers were so blinded by groupness that they could not recognize that those malfunctions were clear signs of impending disaster.

The official report on the crash of Columbia said, “External criticism and doubt . . . reinforced the will to ‘impose the party line vision on the environment, not to reconsider it . . .’ This in turn led to ‘flawed decision-making, self-deception, introversion and diminished curiosity about the world outside the perfect place.’”

This is another reason why sending all these Tesco folks over to America was a bad idea. They believed in themselves too much; they had a record of success together. Had the team been an American team, the Americans would have been more skeptical of British orders and the British executives would have been more skeptical of the American’s claims to success.

In any case, mistakes can only be corrected if one is open to the possibility that one has made mistakes. This team was never open to that possibility and so never heard the voices that were ready to help.

One way of avoiding this is through staffing, as we mentioned. It also why some people, even if they have sufficient resources to fund a project, prefer to bring in a bank or a partner. They are more likely to question assumptions and challenge non-performance.

We were sometimes accused of being Tesco’s enemy. But that was always silly. We were just an analyst. The vendors we knew all were desperately hoping that Tesco would succeed and thus create a new market. Many had visions of tying their wagon to the Tesco star and making their fortunes just as many did with Wal-Mart a generation earlier.

They may have perceived us as an enemy, but we were the most valuable kind of friend. The one who told them the truth.

Perhaps the very best business lesson to learn from the failure of Fresh & Easy is to remember the plea sent by Oliver Cromwell to the General Assembly of Kirk, in which he famously said: I beseech thee, in the bowels of Christ, think it possible you may be mistaken. Possibly the best business advice ever written — and by a Brit! Though the General Assembly paid no attention either.

*****************************

As we consider these 20 points as lodestars to avoid in our own business affairs in 2013, we also think it worth making one point about sustainability. One of the reasons Fresh & Easy made few friends is that it was so sanctimonious on its claims of sustainability.

It put polar bear pictures up in each store as we wrote about here , and claimed it would pay people better and provide health insurance, etc. It was never clear it did anything more sustainably than anyone else but, even if there was such evidence, the potential closure of Fresh & Easy shows that they were not sustainable at all.

Surely it will be no solace to those who lose their jobs that if Fresh & Easy had managed to stay in business, it would have saved some polar bears or paid a higher wage.

**************

So what does Tesco do from here with Fresh & Easy? Four possibilities: Stay, sell, merge or franchise:

STAY There is an off chance that the assessment being undertaken could lead to a decision to stay in the US. If so, our advice would be as follows:

1) Close down and write off the DCs — both the functioning one in El Segundo and the mothballed one in Stockton. Send back all the expatriates to the UK. Kill any private label product that is not already being produced for Tesco elsewhere. Without this overhead, there is a shot. We would do logistics with someone like CH Robinson. Own as few assets as possible, have as small a staff as possible.

2) There are a lot of people that can be hired. The logical people are grocery folks… Cathy Green , formerly of Food Lion, comes to mind, but this is a Hail Mary pass based on the primacy of fresh, so we would probably make Bruce Peterson CEO as he combines experience with regional retailing – Meijer’s, Baker’s etc., with the ability to know how to interface with a global giant due to his Wal-Mart years. Maybe partner him by seeing if we can woo Tim Riley from Giumarra to be COO, and bring Dick Spezzano on as a local consultant. But we would keep the team ultra tight.

3) A lot of stores will have to close. We don’t have the store-by-store data to make that decision here, but basically, either close the Arizona and Nevada divisions and focus in on California or kill off the lowest performing third.

4) We need a new concept. At an earlier date , we suggested abandoning Fresh & Easy and converting the stores, based on their locations, to either Aldi clones or Trader Joe’s clones. That is still optimal, but if we want to have one concept to start, doing a deep discount format is easier than replicating Trader Joe’s. It is relatively easy to under-price people — all that it takes is a willingness to lose money, which Tesco has shown an ability to handle. With the store base cut and the overhead gone, undercutting prices won’t affect Tesco earnings by even a quarter of a percent. In contrast, ongoing losses of the present operation could have run around 3% of earnings.

SELL Easy to say, but who would buy? Many purchasers would want a check on liabilities related to the leases as well as the taxes and maintenance on the distribution and food processing facilities.

1) Wal-Mart would take the whole operation. It would want a fire-sale price — but everyone will because, well, it is a fire sale. More specifically, only about 30 of the stores are profitable, and we have doubts about those numbers. The big distribution and food processing facilities are very specific to Fresh & Easy’s needs and will only be partially used by a buyer or will require significant investment to normalize them.

Still for Wal-Mart, with its small store Wal-Mart Express concept and ambitions to grow in California, and the fact that the whole thing on Wal-Mart scale would be a trial, not a roll-out, the company would be interested. Plus Wal-Mart would relish the headlines as it steps in and saves so many jobs, etc. Unfortunately the rivalry between Tesco and Wal-Mart around the world is so intense that some believe Tesco would burn each store to the ground before it would sell to Wal-Mart.

2) Any of the dollar stores, Aldi and Trader Joe’s would be interested in some or all the locations.

3) Kroger does operate C-stores. It has overlapping operations, so maybe for the right price, it would do a C-store play in the locations. The big problem is that nowadays C-stores that sell gas are the ones with the prime locations, so almost all of these locations are secondary locations.

4) Cerberus , or any of the other private equity groups or real estate trusts, would buy the sites to resell, maybe temporarily operating Fresh & Easy, where they are profitable. Sort of like Albertsons LLC. These stores don’t have to be food stores at all.

MERGE 1) The most logical merger would be for Supervalu to contribute its Save-A-Lot division, Tesco to contribute Fresh & Easy, have Tesco put in money to convert the Fresh & Easy Stores to Save-A-Lots and to fund the integration. The stores would have viable format and operational structure. We could bring back Mike Kemp in to help with the plan. It could be structured to give Supervalu some cash.

2) Tesco used to be partners with Safeway in an internet shopping service. The stores don’t work as standalone entities but we wonder if they couldn’t work as “Vons Express” stores to capture fill-in business in between trips to the larger grocery stores. Maybe Tesco puts in the real estate and some money for revamp and Safeway puts in its banner names, frequent shopper program, market knowledge and managerial skill — maybe something could work. Of Course, Safeway might rather let them crash and burn as there is usually no love lost when formers partners decide to compete with you.

FRANCHISE 1) How about finding someone to do the wholesaling and then selling each store to its manager or to local entrepreneurs? Just because Fresh & Easy only sells $50,000 a week at a particular store doesn’t mean that an individual operator can’t do a quarter million. They might work 24 hours, customize the assortment to the community, buy opportunities off the local wholesale market, etc.

*************

Our guess as to what will happen? Tesco will sell the whole thing to a real estate trust or private equity group based on the real estate, possibly with Tesco having to write a check to exit the market.

The problem is that the announcement has demoralized workers. The best people are leaving every day, theft is already almost certainly going through the roof, so they just need to exit and put this nightmare behind them.

Source: Jim Prevor's Perishable Pundit

© Copyright 2021 | Phoenix Media Network | All Rights Reserved | Terms of Service | Privacy Policy

Marketing Process Analysis

Segmentation, targeting, positioning, marketing strategic planning, marketing 5 concepts analysis, swot analysis & matrix, porter five forces analysis, pestel / pest / step analysis, cage distance analysis international marketing analysis leadership, organizational resilience analysis, bcg matrix / growth share matrix analysis, block chain supply chain management, paei management roles, leadership with empathy & compassion, triple bottom line analysis, mckinsey 7s analysis, smart analysis, vuca analysis ai ethics analysis analytics, tesco's fresh & easy: learning from u.s. exit case study solution & analysis / mba resources.

• Tesco's Fresh & Easy: Learning from U.S. Exit
• Strategy & Execution / MBA Resources

Introduction to case study solution

EMBA Pro case study solution for Tesco's Fresh & Easy: Learning from U.S. Exit case study

At EMBA PRO , we provide corporate level professional case study solution. Tesco's Fresh & Easy: Learning from U.S. Exit case study is a Harvard Business School (HBR) case study written by Christopher Williams, Chandra Sekhar Ramasastry. The Tesco's Fresh & Easy: Learning from U.S. Exit (referred as “Fresh Tesco” from here on) case study provides evaluation & decision scenario in field of Strategy & Execution. It also touches upon business topics such as - Value proposition, . Our immersive learning methodology from – case study discussions to simulations tools help MBA and EMBA professionals to - gain new insight, deepen their knowledge of the Strategy & Execution field, and broaden their skill set.

Urgent - 12Hr

• 100% Plagiarism Free
• On Time Delivery | 27x7
• PayPal Secure
• 300 Words / Page

Case Description of Tesco's Fresh & Easy: Learning from U.S. Exit Case Study

In mid-April 2013, the chief executive officer of Tesco PLC, the world's third largest global retailer headquartered in London, United Kingdom, must explain to shareholders his decision to close down the operations of the fully owned subsidiary, Fresh & Easy Neighborhoods Market Inc., in the United States. Following a December 2012 strategic review that reported that the subsidiary was not delivering acceptable returns, operations have already been discontinued and a buyer is being sought. Although the focus on fresh food to ameliorate the health care costs of obesity in the United States was a driver for establishing the subsidiary, the effects of the 2008 recession discouraged consumers from paying the higher costs of fresh food. Is exiting the United States the right decision for Tesco? How should the process of exit be managed? Are there any takeaways from the U.S. operations that Tesco can apply elsewhere in its global strategy?

Case Authors : Christopher Williams, Chandra Sekhar Ramasastry

Topic : strategy & execution, related areas :, what is the case study method how can you use it to write case solution for tesco's fresh & easy: learning from u.s. exit case study.

Almost all of the case studies contain well defined situations. MBA and EMBA professional can take advantage of these situations to - apply theoretical framework, recommend new processes, and use quantitative methods to suggest course of action. Awareness of the common situations can help MBA & EMBA professionals read the case study more efficiently, discuss it more effectively among the team members, narrow down the options, and write cogently.

Case Study Solution Approaches

Three Step Approach to Tesco's Fresh & Easy: Learning from U.S. Exit Case Study Solution

The three step case study solution approach comprises – Conclusions – MBA & EMBA professionals should state their conclusions at the very start. It helps in communicating the points directly and the direction one took. Reasons – At the second stage provide the reasons for the conclusions. Why you choose one course of action over the other. For example why the change effort failed in the case and what can be done to rectify it. Or how the marketing budget can be better spent using social media rather than traditional media. Evidences – Finally you should provide evidences to support your reasons. It has to come from the data provided within the case study rather than data from outside world. Evidences should be both compelling and consistent. In case study method there is ‘no right’ answer, just how effectively you analyzed the situation based on incomplete information and multiple scenarios.

Case Study Solution of Tesco's Fresh & Easy: Learning from U.S. Exit

We write Tesco's Fresh & Easy: Learning from U.S. Exit case study solution using Harvard Business Review case writing framework & HBR Strategy & Execution learning notes. We try to cover all the bases in the field of Strategy & Execution, and other related areas.

Objectives of using various frameworks in Tesco's Fresh & Easy: Learning from U.S. Exit case study solution

By using the above frameworks for Tesco's Fresh & Easy: Learning from U.S. Exit case study solutions, you can clearly draw conclusions on the following areas – What are the strength and weaknesses of Fresh Tesco (SWOT Analysis) What are external factors that are impacting the business environment (PESTEL Analysis) Should Fresh Tesco enter new market or launch new product (Opportunities & Threats from SWOT Analysis) What will be the expected profitability of the new products or services (Porter Five Forces Analysis) How it can improve the profitability in a given industry (Porter Value Chain Analysis) What are the resources needed to increase profitability (VRIO Analysis) Finally which business to continue, where to invest further and from which to get out (BCG Growth Share Analysis)

SWOT Analysis of Tesco's Fresh & Easy: Learning from U.S. Exit

SWOT analysis stands for – Strengths, Weaknesses, Opportunities and Threats. Strengths and Weaknesses are result of Fresh Tesco internal factors, while opportunities and threats arise from developments in external environment in which Fresh Tesco operates. SWOT analysis will help us in not only getting a better insight into Fresh Tesco present competitive advantage but also help us in how things have to evolve to maintain and consolidate the competitive advantage.

- High customer loyalty & repeat purchase among existing customers – Fresh Tesco old customers are still loyal to the firm even though it has limited success with millennial. I believe that Fresh Tesco can make a transition even by keeping these people on board.

- Experienced and successful leadership team – Fresh Tesco management team has been a success over last decade by successfully predicting trends in the industry.

- Fresh Tesco business model can be easily replicated by competitors – According to Christopher Williams, Chandra Sekhar Ramasastry , the business model of Fresh Tesco can be easily replicated by players in the industry.

- Low profitability which can hamper new project investment – Even though Fresh Tesco financial statement is stable, but going forward Fresh Tesco 5-7% profitability can lead to shortage of funds to invest into new projects.

Opportunities

- Lucrative Opportunities in International Markets – Globalization has led to opportunities in the international market. Fresh Tesco is in prime position to tap on those opportunities and grow the market share.

- Increase in Consumer Disposable Income – Fresh Tesco can use the increasing disposable income to build a new business model where customers start paying progressively for using its products. According to Christopher Williams, Chandra Sekhar Ramasastry of Tesco's Fresh & Easy: Learning from U.S. Exit case study, Fresh Tesco can use this trend to expand in adjacent areas .

- Home market marketing technique won’t work in new markets such as India and China where scale is prized over profitability.

- Customers are moving toward mobile first environment which can hamper the growth as Fresh Tesco still hasn’t got a comprehensive mobile strategy.

Once all the factors mentioned in the Tesco's Fresh & Easy: Learning from U.S. Exit case study are organized based on SWOT analysis, just remove the non essential factors. This will help you in building a weighted SWOT analysis which reflects the real importance of factors rather than just tabulation of all the factors mentioned in the case.

What is PESTEL Analysis

PESTEL /PEST / STEP Analysis of Tesco's Fresh & Easy: Learning from U.S. Exit Case Study

PESTEL stands for – Political, Economic, Social, Technological, Environmental, and Legal factors that impact the macro environment in which Fresh Tesco operates in. Christopher Williams, Chandra Sekhar Ramasastry provides extensive information about PESTEL factors in Tesco's Fresh & Easy: Learning from U.S. Exit case study.

Political Factors

- Political consensus among various parties regarding taxation rate and investment policies. Over the years the country has progressively worked to lower the entry of barrier and streamline the tax structure.

- Political and Legal Structure – The political system seems stable and there is consistency in both economic policies and foreign policies.

Economic Factors

- Inflation rate is one of the key criteria to consider for Fresh Tesco before entering into a new market.

- According to Christopher Williams, Chandra Sekhar Ramasastry . Fresh Tesco should closely monitor consumer disposable income level, household debt level, and level of efficiency of local financial markets.

Social Factors

- Leisure activities, social attitudes & power structures in society - are needed to be analyzed by Fresh Tesco before launching any new products as they will impact the demand of the products.

- Demographic shifts in the economy are also a good social indicator for Fresh Tesco to predict not only overall trend in market but also demand for Fresh Tesco product among its core customer segments.

Technological Factors

- Artificial intelligence and machine learning will give rise to importance of speed over planning. Fresh Tesco needs to build strategies to operate in such an environment.

- 5G has potential to transform the business environment especially in terms of marketing and promotion for Fresh Tesco.

Environmental Factors

- Environmental regulations can impact the cost structure of Fresh Tesco. It can further impact the cost of doing business in certain markets.

- Consumer activism is significantly impacting Fresh Tesco branding, marketing and corporate social responsibility (CSR) initiatives.

Legal Factors

- Property rights are also an area of concern for Fresh Tesco as it needs to make significant infrastructure investment just to enter new market.

- Intellectual property rights are one area where Fresh Tesco can face legal threats in some of the markets it is operating in.

What are Porter Five Forces

Porter Five Forces Analysis of Tesco's Fresh & Easy: Learning from U.S. Exit

Competition among existing players, bargaining power of suppliers, bargaining power of buyers, threat of new entrants, and threat of substitutes.

What is VRIO Analysis

VRIO Analysis of Tesco's Fresh & Easy: Learning from U.S. Exit

VRIO stands for – Value of the resource that Fresh Tesco possess, Rareness of those resource, Imitation Risk that competitors pose, and Organizational Competence of Fresh Tesco. VRIO and VRIN analysis can help the firm.

What is Porter Value Chain

Porter Value Chain Analysis of Tesco's Fresh & Easy: Learning from U.S. Exit

As the name suggests Value Chain framework is developed by Michael Porter in 1980’s and it is primarily used for analyzing Fresh Tesco relative cost and value structure. Managers can use Porter Value Chain framework to disaggregate various processes and their relative costs in the Fresh Tesco. This will help in answering – the related costs and various sources of competitive advantages of Fresh Tesco in the markets it operates in. The process can also be done to competitors to understand their competitive advantages and competitive strategies. According to Michael Porter – Competitive Advantage is a relative term and has to be understood in the context of rivalry within an industry. So Value Chain competitive benchmarking should be done based on industry structure and bottlenecks.

What is BCG Growth Share Matrix

BCG Growth Share Matrix of Tesco's Fresh & Easy: Learning from U.S. Exit

BCG Growth Share Matrix is very valuable tool to analyze Fresh Tesco strategic positioning in various sectors that it operates in and strategic options that are available to it. Product Market segmentation in BCG Growth Share matrix should be done with great care as there can be a scenario where Fresh Tesco can be market leader in the industry without being a dominant player or segment leader in any of the segment. BCG analysis should comprise not only growth share of industry & Fresh Tesco business unit but also Fresh Tesco - overall profitability, level of debt, debt paying capacity, growth potential, expansion expertise, dividend requirements from shareholders, and overall competitive strength. Two key considerations while using BCG Growth Share Matrix for Tesco's Fresh & Easy: Learning from U.S. Exit case study solution - How to calculate Weighted Average Market Share using BCG Growth Share Matrix Relative Weighted Average Market Share Vs Largest Competitor

5C Marketing Analysis of Tesco's Fresh & Easy: Learning from U.S. Exit

4p marketing analysis of tesco's fresh & easy: learning from u.s. exit, porter five forces analysis and solution of tesco's fresh & easy: learning from u.s. exit, porter value chain analysis and solution of tesco's fresh & easy: learning from u.s. exit, case memo & recommendation memo of tesco's fresh & easy: learning from u.s. exit, blue ocean analysis and solution of tesco's fresh & easy: learning from u.s. exit, marketing strategy and analysis tesco's fresh & easy: learning from u.s. exit, vrio /vrin analysis & solution of tesco's fresh & easy: learning from u.s. exit, pestel / step / pest analysis of tesco's fresh & easy: learning from u.s. exit, swot analysis and solution of tesco's fresh & easy: learning from u.s. exit, references & further readings.

Christopher Williams, Chandra Sekhar Ramasastry (2018) , "Tesco's Fresh & Easy: Learning from U.S. Exit Harvard Business Review Case Study. Published by HBR Publications.

Case Study Solution & Analysis

• Walmart's African Expansion Case Study Solution & Analysis
• Hennes & Mauritz, 2000 Case Study Solution & Analysis
• Inditex: 2000 Case Study Solution & Analysis
• Skype in the Voice-over-IP Industry: A Commercially Viable Blue Ocean? Case Study Solution & Analysis
• The Great East Japan Earthquake B: Fast Retailing Group's Response Case Study Solution & Analysis
• Sobey's Inc: A Strategic Approach to Sustainable Seafood Supply Case Study Solution & Analysis
• Transforming Tommy Hilfiger (A) Case Study Solution & Analysis
• Ghurka Case Study Solution & Analysis
• INGLOT: Conquering the World Case Study Solution & Analysis
• Flipkart.com Case Study Solution & Analysis

Explore More

Feel free to connect with us if you need business research.

You can download Excel Template of Case Study Solution & Analysis of Tesco's Fresh & Easy: Learning from U.S. Exit

• Harvard Business School →
• Faculty & Research →
• August 2010 (Revised November 2010)
• HBS Case Collection

Tesco PLC: Fresh & Easy in the United States

• Format: Print
• | Pages: 21

About The Author

John A. Quelch

More from the author.

• Faculty Research

Promoting Land and Nature Jerky, Spreadsheet for Students (Brief Case)

Promoting land and nature jerky, spreadsheet for instructors (brief case), promoting land and nature jerky (brief case).

• Promoting Land and Nature Jerky, Spreadsheet for Students (Brief Case)  By: John A. Quelch and Katherine B. Hartman
• Promoting Land and Nature Jerky, Spreadsheet for Instructors (Brief Case)  By: John A. Quelch and Katherine B. Hartman
• Promoting Land and Nature Jerky (Brief Case)  By: John A. Quelch and Katherine B. Hartman